The charity undertook a national survey of household finances and found that more than six in 10 households who took a payment holiday will struggle to repay their debts when these arrangements end.

People struggling to pay mortgages, credit cards and loans during the coronavirus have been able to take payment holidays of up to six months in total.

For many, these payment holidays will end on 31 October 2020 – the same date the government’s Coronavirus Jobs Retention Scheme finishes.

Standard Life Foundation says the combined end of payment holidays and the furlough scheme could leave many people “facing job losses and crippling financial strain”.

The charity’s report Emerging from lockdown, warns of a further financial storm for millions.

Of those households granted a payment holiday, nearly half have no money in savings at all, and 46% them think it is very likely (26%) or quite likely (20%) they will experience a loss of earnings as a result of Covid-19 in the next three months.

Researchers questioned nearly 6,000 householders and found only a quarter of those who had a bill payment holiday had sought debt advice.

But about 1.6 million households could need debt advice when payment holiday arrangements end.

Standard Life Foundation warned that, should this level of demand materialise, debt advice charities will face a very difficult situation.

The report also found that although government has allocated funding for more debt advice, this would not be in place by the end of October when many are likely to need it.

The Financial Conduct Authority has recently published draft guidance advising firms on how to help mortgagors beyond the end of payment breaks. But at present there is little to no guidance on what customers with a payment arrangement on other commitments should do when it ends.

Standard Life Foundation says measures should include: income/expenditure checks to assess ability of borrowers to repay; flexible and lower payment arrangements; social tariffs (for utility providers); extending the lending period (for unsecured credit and mortgages); and, where appropriate, writing off debts.

Under current circumstances enforcement action should be a last resort, and used when these measures have failed.

At the end of July, one in six households (17%) had their earnings supported by one of the governments’ job retention schemes. These schemes are due to end on 31 October 2020, leaving about 3 million households expecting a drop in income.

Mubin Haq, CEO of the Standard Life Foundation, said: “We are facing a cliff-edge situation at the end of October. Three million households have fallen through the cracks on the government’s job retention programmes. They will be joined by millions more when furlough schemes come to an end. This is happening at the same time as the vast majority of payment holiday measures come to an end, creating a perfect financial storm. Incomes reducing whilst outgoings are set to increase. Already nearly half of those on payment holidays are using credit to pay for food and other daily essential expenses.

“Regulators and lenders need to rapidly consider how they will manage the situation from the end of October 2020 to avoid large numbers of households facing enforcement action, including families losing their homes. In addition, capacity on debt advice needs to be increased quickly; more debt advisors are needed but they will not be in place within the next few months, so interim measures should be put in place swiftly.”